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Dorothy Coleman

Senate Taxwriters Advance Nomination of Top Treasury Tax Official

By | Shopfloor Policy, Taxation | No Comments

The Senate Finance Committee today approved the nomination of tax expert David Kautter to be assistant treasury secretary for tax policy, clearing the way for Senate confirmation of the nominee to a post where he will play a key role in the tax reform debate.

Over the past several months, tax reform meetings between the House, Senate and administration have heated up and having Kautter in place at Treasury will bring additional technical expertise to these discussions and hopefully help speed up the process. As a liaison to the IRS, he will also play a major role in the current effort underway to repeal or rewrite a number of tax rules issued during the previous administration.

Kautter, whose nomination was put forth by President Donald Trump in May, is extremely well qualified for the job. He serves as partner-in-charge of RSM’s Washington national tax practice. Earlier in his career, he was managing director of the Kogod Tax Center and executive-in-residence at the Kogod School of Business at American University. Before holding this position, he spent more than 30 years at Ernst & Young, serving as director of national tax for more than 13 years.

Advancing pro-growth tax reform and rolling back anti-manufacturing tax regulation are two top priorities for the National Association of Manufacturers, and time is running out on both. Having Kautter in place as the assistant treasury secretary for tax policy will be key to advancing these two initiatives. We strongly urge the Senate to confirm his nomination without delay.

Treasury Opts to Revisit Tax Regulations Causing Problems for Manufacturers

By | Regulations, Shopfloor Policy, Taxation | No Comments

The Treasury Department in a notice issued today said it plans to propose reforms, including possible repeal, of eight sets of regulations issued in 2016 by the Obama administration. Included on the list are four regulation projects of specific concern to manufacturers: Section 385 debt-equity rules, proposed rules on valuing minority interests in family-owned businesses, rules for calculating gains and losses on currency exchanges and regulations allowing contractors hired by the IRS to participate fully in summons interviews and receive summoned documents.

Notice 2017-38 was issued under an executive order issued by President Donald Trump in April that asked Treasury to identify tax regulations issued in 2016 that impose an undue financial burden on taxpayers, add unnecessary complexity to the tax code or exceed the statutory authority of the IRS. Under the executive order, Treasury has until September 18, 2017, to recommend specific changes to regulations to address these issues.

The Section 385 debt/equity regulations were proposed in April 2016 and finalized six months later. As originally proposed, the rules, which would treat intercompany debt as equity, would have imposed new taxes on manufacturers and threatened legitimate and well-established business practices. While the National Association of Manufacturers’ (NAM) aggressive, large-scale advocacy effort was successful in obtaining some favorable changes to the proposed rules, the final regulations still impose a significant and unnecessary administrative and cost burden on manufacturers. We continue to advocate total repeal of these rules.

Also on the list are proposed regulations under Section 2704 on valuing minority interests in family-owned businesses, which were issued in the fall of 2016. NAM members believe that the proposed regulations, which incorporate some of the most sweeping changes to estate tax policies in the past 25 years, would unnecessarily increase estate and gift taxes on family-owned manufacturing companies by an estimated 30 percent or more, severely impacting the ability of owners of these family businesses to transfer their companies to the next generations. If finalized in their current form, these regulations would harm their ability to invest and grow their businesses and reduce their competitiveness versus non-family-owned firms. Consequently, we have urged both the Trump and Obama administrations to withdraw this proposal.

Treasury also included the final and temporary Section 987 regulations on the review list. These regulations, which would change the way companies calculate certain currency exchange gains and losses, would require businesses to change their tax and accounting systems and dedicate significant time and resources to comply with regulations. Moreover, in many cases, companies would not be able to get new technology systems developed and installed by the January 1, 2018, effective date for the final regulations, forcing these companies to spend additional resources on temporary systems.

The Section 987 regulations represent a significant change from the longstanding proposed regulations and impose new and additional compliance burdens on companies. Given the negative impact on jobs, investment and economic growth, we support withdrawal of these regulations.

Finally, Treasury indicated that it will revisit final regulations under Section 7602 that allow contractors hired by the IRS (i.e., outside economists, engineers, consultants or attorneys) access to books, papers, records or other data summoned by the IRS. In addition, under the regulations, contractors may, in the presence of an IRS officer or employee, participate fully in the interview of a person the IRS has summoned as a witness to provide testimony under oath.

The NAM believes that these regulations also should be repealed. The final regulations fall short on both policy and procedural grounds. Moreover, by allowing contractors to participate fully in summons interviews and receive summoned documents, the regulations will lead to longer and less efficient examinations.

Manufacturers applaud Treasury for acting decisively to begin to address the onerous, costly and unnecessary burden these tax regulations impose on manufacturers. We strongly urge Treasury recommend the withdrawal or repeal of these regulations in its final recommendations in September.

Once Again, the House Approves a Measure to Simplify State Taxation of Nonresident Workers

By | Shopfloor Policy, Taxation | No Comments

The House this week, by voice vote, approved the Mobile Workforce State Income Tax Simplification Act of 2017 (H.R. 1393), which clarifies and simplifies the ability of states to tax nonresident employees. The legislation—which sets a bright line test for when states can tax income earned by nonresident workers—has been approved by the House in earlier sessions of Congress but has yet to pass the Senate.

Many manufacturers have employees who travel outside their home states as part of their job. Unfortunately, these out-of-state assignments sometimes result in an arbitrary compliance burden and tax liability for both employees and employers. In particular, employees are required to track and comply with various tax filing requirements while employers are required to maintain records and withhold state income taxes for these employees. This is particularly onerous for small and medium-sized manufacturers that do not have in-house tax departments. Clarifying the ability of states to tax mobile workforces will free up resources for employers to use in their business and leave more money in the paychecks of their employees.

Now that the House has—once more—supported this commonsense legislation, the National Association of Manufacturers urges the Senate to follow suit and pass H.R. 1393.

Manufacturers Support Revisiting Dodd-Frank

By | Regulations, Shopfloor Policy | No Comments

The House this week will vote on the Financial CHOICE Act (H.R. 10), a bill that would roll back a number of job-killing, anti-investment provisions in the Dodd-Frank Act. During the legislative consideration of the Dodd-Frank Act in 2009 and 2010, the National Association of Manufacturers (NAM) repeatedly urged Congress to focus its efforts on strengthening the U.S. financial system. Unfortunately, this didn’t happen, and we are pleased that the House is revisiting a number of these ill-conceived provisions.

The bill would repeal the so-called “pay ratio” rule, which requires companies to regularly disclose the ratio of employees’ median pay to the compensation of the company’s chief executive. Despite the absence of a clear benefit, this rule would require thousands of manufacturers in the United States to incur significant financial cost, dedicate substantial man-hour resources and overcome numerous administrative challenges to comply with the rule.

The CHOICE Act also raises the threshold so that only shareholders who hold at least 1 percent of the company’s stock for three years can submit a proposal on a company’s ballot and excludes a shareholder proposal if a similar proposal appeared on the ballot and was defeated within the past five years.

It also brings transparency to proxy advisory firms by requiring them to register with the Securities and Exchange Commission (SEC) and adopt conflict-of-interest policies. Proxy advisory firms are third-party groups that provide proxy voting advice for investors. Two firms—Institutional Shareholder Services, Inc. and Glass, Lewis & Co.—control 97 percent of the proxy advisory market and wield tremendous power in shaping corporate governance, yet they are virtually unregulated entities.

Finally, H.R. 10 would repeal a Dodd-Frank provision that requires companies publicly traded in the United States to disclose annually to the SEC any use of conflict minerals in their supply chains, including minerals originating in the Democratic Republic of the Congo (DRC) and its adjoining countries.

While the NAM supports addressing the atrocities occurring in the DRC, it has underscored that the conflict minerals disclosure requirements pose costly, burdensome and impracticable financial and reporting burdens, and potentially a substantial auditing burden, on NAM members of all sizes—and in all sectors of the manufacturing economy. The NAM strongly supports the repeal of the conflict minerals disclosure requirement in the CHOICE Act.

Manufacturers struggle under an enormous regulatory burden. Indeed, an NAM report released earlier this year found that manufacturers in the United States face 297,696 federal regulations. The NAM supports efforts to reduce this regulatory burden and make businesses in the United States more competitive in the global marketplace and free up additional resources for investment and job creation. Passing the CHOICE Act will help bring us closer to our goal.

Manufacturers Support Committee Action on Mobile Workforce Bill

By | Shopfloor Policy | No Comments

The National Association of Manufacturers is pleased that the House Judiciary Committee on March 21 is slated to consider the Mobile Workforce State Income Tax Simplification Act (H.R. 1393) introduced by Reps. Mike Bishop (R-MI) and Hank Johnson (D-GA). The bill, which has been introduced in several previous sessions of Congress, clarifies and simplifies the ability of states to tax nonresident employees temporarily working in the state and eliminate a tax and compliance burden felt by job creators and their workers. From our perspective, this commonsense legislation is more urgent than ever.

Many manufacturers have employees who travel outside their home states as part of their job. Unfortunately, these out-of-state assignments sometimes result in an arbitrary and punitive compliance burden and tax liability for both employees and employers. In particular, employees are required to track and comply with various tax filing requirements while employers are required to maintain records and withhold state income taxes for these employees. This compliance burden is particularly onerous for small and medium-sized manufacturers that do not have in-house tax departments.

H.R. 1393 would clarify that a state cannot assess state income taxes on a nonresident employee temporarily working in the state for 30 days or less in a calendar year. Conversely, states could legitimately tax nonresident employees working more than 30 days a year in the state.

We urge all members of Congress to support quick action on this important tax simplification legislation. Clarifying the ability of states to tax mobile workforces will free up resources for employers to use in their business and leave more money in the paychecks of their employees.

Eliminating a Deduction for Advertising Will Not Reduce Health Care Costs

By | General, Health Care, Shopfloor Economics, Shopfloor Policy | No Comments

During the current debate on legislation to repeal Obamacare, the Senate may have the opportunity to vote on a provision—introduced by Sen. Al Franken (D-MN)—that would eliminate the ability of companies to deduct advertising and promotional expenses related to prescription drugs. This is a misguided idea, and we urge senators to reject this proposal. Long recognized as a legitimate and necessary business expense, advertising plays a critical role in the competitiveness of manufacturers and the success of their products. Advertising plays a central role in driving market growth and innovation, which benefits both the manufacturer and the consumer. In doing so, advertising also helps drive prices down by spurring competition. In contrast, disallowing a deduction for direct-to-consumer advertising of prescription drugs increases the costs to pharmaceutical companies by denying a legitimate business expense and also unfairly targets a specific industry for discriminatory tax treatment.

When Manufacturing Succeeds, America Succeeds

By | Shopfloor Main, Shopfloor Policy, Taxation | No Comments

The National Association of Manufacturers (NAM) is releasing in-depth Competing to Win policy papers to equip Congress and the Trump administration with blueprints for delivering on manufacturers’ priorities. Today’s release is the second in the series and focuses on tax. For more on the NAM’s 12 Days of Transition, follow @ShopfloorNAM.

If there is one single issue that could have the greatest positive impact on manufacturing overall, tax reform is likely that issue.

As it stands today, our tax code is dragging down manufacturers and holding us back. We have the highest corporate tax rate in the world, and some small manufacturers that are structured as S-corporations and file as individuals pay tax rates greater than 40 percent, which is absurd.

Our goal needs to be making the United States the most attractive place to manufacture and invest, and we will make great strides in that direction through pro-growth tax reform.

In the NAM’s “Competing to Win” agenda, released in early 2016 and now updated with in-depth policy blueprints, we lay out very clearly the problems and solutions for our elected officials, and we have shared this with President-elect Donald Trump’s transition team.

For manufacturers, a tax reform plan must include:

  • Reduced tax rates on corporate and pass-through business income;
  • A robust capital cost-recovery system;
  • Strong research and development incentives; and
  • Modern, competitive international tax rules.

A study released by the NAM in January 2015, titled A Missed Opportunity: The Economic Cost of Delaying Pro-Growth Tax Reform, found that comprehensive tax reform that includes this multipronged pro-growth tax package would substantially grow the economy and result in increased jobs and investment. Over a 10-year period, this pro-growth tax reform plan would:

  • Increase GDP by more than $12 trillion relative to Congressional Budget Office projections;
  • Increase investment by more than $3.3 trillion; and
  • Add more than 6.5 million jobs to the U.S. economy.

Our outdated system is taking a toll on our economy. Just look at recent years’ slow growth, static investment and an employment rate that does not match our growth potential. Manufacturers stand ready to be the solution in generating economic growth that we have not seen in a very long time. We are not just identifying the problems, we are being the solution. After all, when manufacturing succeeds, America succeeds.

To view the blueprint, click here.

 

This blog is part of the NAM’s 12 Days of Transition series, an effort to provide the presidential transition team and other Washington policymakers with a roadmap to bolster manufacturing in the United States. Read the other blogs in the series here.

Treasury Proposal Threatens Family-Owned Businesses

By | Shopfloor Main, Shopfloor Policy | No Comments

tax-study-infographic-03The Treasury Department this summer blindsided small manufacturers with a proposal that could derail plans by many business owners to pass their companies down to future generations. The proposed regulations—which incorporate some of the most sweeping changes to estate tax policies in the past 25 years—could increase estate and gift taxes on family-owned businesses by an estimated 30 percent or more. Read More